Shopping, Payments, Revised!

Future of shopping and payments.

Everyone hates standing in long queues at the checkout counter. Everyone wants to quickly scan and pay and just leave the store and not waste unnecessary time at the store where the human billing at the checkout counter needs to be double checked for any errors. We do it every day. We pick what we want, then we queue at the checkout counter, get the items scanned and then the whole process of using your card with chip and pin routine takes another few trial and errors.

But shopping has changed so much in the last few years. While most electronics have arguably gone from shopping in stores to ordering online completely, the trend towards online shopping is ever increasing. Going out to buy a USB cable? Well I haven’t heard that in a while. Stores are only good for emergency purchases when it comes to electronics. Like if you lost your charging cable or you are running out of hard drive space and really need one in the next few hours. But with same day delivery even that won’t be necessary anymore.

But shopping is about take a serious turn I believe in next 2-3 years. And Amazon’s latest attempt is nothing but an excellent example of that. With Amazon Go you just walk into a store and pickup items you want. No payments, No long queues, No mistakes. Just walk out and Amazon will bill you later. Sounds too good to be true? Not really. Payments are made easier online than in store. They are safer, faster and a lot more error-free than something done in a store. And it’s better to shop in a store than search online. You can see what you are buying and sometimes you buy something you see than something you try to remember. Amazon has made shopping extremely easy and its only going to get easier with drone deliveries and what not.

Food, clothes and even calling cabs (Uber) are a tap away. And then there comes payment. Payments are at the center of everything. And with countries like India and China trying to become fully digital in payments, payments become more important than ever. Digital payments are a simple concept. You have a bank account linked to a card issued by someone like Visa or MasterCard and several others. It can be a credit card but it is still issued to a credit account. Via a few steps between merchant accounts, your bank accounts, and acquirer (Visa, MasterCard etc.) the money gets transferred from your account to the merchant account. But this involves few steps like entering your 16 digit card numbers and a few other card details. Sometimes even a six digit authorization code sent to your registered mobile number.

Too much hassle? This will become a lot simpler. With companies like Apple, Google introducing Apple Pay and Android Pay, this will get a lot simpler and more secure. Apple pay will first make you enter your card details and authorize your device for payments. Then when you have to pay, you simply use your fingerprint if its online or use your fingerprint and a tap (not really, just bring it close enough to the reader) if its in-store. Google has a similar method of paying but its not as popular as Apple Pay. Apple Pay is extremely quick and easy to use. I believe that the security features offered by Apple Pay and Android Pay have an edge over any other payment system online. Everyone has a smartphone, be it Android or Apple. Everyone will soon, even in countries like India and China, use their cards for payments in-stores and elsewhere. And people will soon realize the ease with which they can make their payments. And the best part is that it costs nothing more to the customer.

Now the downside is that Apple takes a small cut in using their payment system from the banks offering Apple Pay, roughly 0.15%. This may not sound much and but it becomes easier to accept given the added layer of security especially from someone like Apple and Google which would take lot of effort and time build on their own. But some merchants like Amazon offer their own payment system. This means that they get this cut instead of Apple or Google. This leads to fragmentation in payment options and customer confusion.

With growing smartphone market and growing chances of making an e-payment in-stores, merchants will soon realize the potential of these services and eventually cave. I already use Apple Pay in U.S almost everywhere online, inside apps and it becomes easier to trust Apple or Google to make my payment than enter my card number online. While it’s a hit and miss to use Apple Pay in-stores and at food joints, it does make it a lot quicker and safer to pay. That old magnetic stripe will be missed now that almost every card is coming with a chip and pin. But soon cards themselves will disappear.